As a Dallas bankruptcy lawyer, I see clients from all walks of life come in for help with their financial hardship. No longer is bankruptcy for the unemployed or seriously ill, but many hardworking middle class families are also finding it tough to make ends meet in this turbulent economy. Small business owners are fighting off economic blows as they struggle to stay afloat. While I enjoy serving clients of all kinds, I also don’t feel bankruptcy is right for everyone. It is important that people become educated about the bankruptcy process and how it could both benefit and hurt them before they decide to file.

Is It Right?

Bankruptcy is a great tool that has helped many people find their way back to financial freedom. In general, the risks involved with bankruptcy are miniscule and nothing compared to the risks of continuing to default on debts. However, there are a few questions to ask before proceeding with a case:

Can I afford to repay my debts? Although some people may feel trapped by their debts, it may be possible to repay their debts through further investigation of their finances. Many people seek Chapter 7 assistance and don’t qualify because their income level is too high. In this case, they may be eligible to file for Chapter 13, in which they will be required to repay at least a portion of their debts. Even if you don’t think you can afford to repay your debts, it is wise to really examine your budget to see if there is any income that can be used to repay debts.

Have I tried other methods of debt management? Bankruptcy should not be the first line of action for anyone. There are several alternatives that can be tried before deciding to file for bankruptcy. Debt settlement and debt negotiation are two ways to attempt to resolve debts outside of bankruptcy. If creditors are unwilling to negotiate, you cannot secure a plan that suits your budget or are concerned about certain assets; bankruptcy may be an option to consider.

Have I transferred assets or accumulated new debts recently? There are strict rules about how debts and assets can be managed prior to filing for bankruptcy. If you have transferred or sold assets within the last three years or acquired new debts within six months of filing, you should hold off on filing and consult with a bankruptcy attorney.

Do I have any secured debt assets? One of the most sought after benefits of bankruptcy is the protection of assets. Secured debts, like a mortgage or car loan, are difficult to manage in bankruptcy unless they are repaid or qualify for exemption.  Due to the sensitive nature of secured debt assets, these debts are best managed through Chapter 13 bankruptcy.